China Forbids Glaxo VP From Leaving In Bribery Probe

China blocked GlaxoSmithKline's (GSK) local head of finance from leaving the country amid a bribery investigation.

Investors appeared to take the report in stride and shares rose in Wednesday afternoon trading after the company disclosed the investigation.

The travel restriction on the British drugmaker's vice president for finance in China, Steve Nechelput, was imposed at the end of June, the company said. Nechelput wasn't arrested and is free to move around the country.

The drugmaker's stock hit a more than five-year intraday high 54 on May 28 before consolidating. Glaxo's revenue has fallen in three of the last four quarters.

Among the largest companies in the Medical-Ethical Drugs group, ranked a healthy 34 on IBD's list of 197 industry groups, Pfizer (PFE) was up 0.4% and Merck (MRK) 0.2%, while Swiss-based Roche Holding (RHHBY) fell 1%.

In the related biotech drugmakers group, Celgene (CELG), which is on the IBD Leaderboard list of highly rated stocks near a buy point, rose 1.3%.

Four senior GSK Chinese executives have been detained by police in connection with the probe, including Vice President and Operations Manager Liang Hong, who has said on Chinese state television that he funneled money through travel agencies by arranging conferences, including some that were never held.

Drug companies are homing in on the fast-growing Chinese market. Market tracker IHS Health expects China to pass Japan as the world's second-biggest drug market behind the U.S. by 2016.

In its statement Wednesday, Glaxo said it's cooperating with Chinese authorities on the investigation.

"GSK has zero tolerance for any behavior of this nature," the company said.

It said it's put an immediate stop to use of travel agencies identified in the investigation and it's conducting its own internal review of transactions related to the agencies.

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07/31/2015 10:37 AM ET

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